Silver Lining from Pandemic, #3: The Rise of the Exurbs

I had a conversation with a friend in the industry about some of the “what comes after?” stuff, probably like everybody else in the real estate business. While most of the “what comes afterwards?” was a bit of a downer, there was one thing we both agreed is a positive.

We both believe that we are about to see a surge in demand for — and therefore, the price of — homes in exurban and country areas. We both think this is a Good Thing(tm) for a whole host of reasons.

Let’s begin with what is likely obvious: why the exurbs will rise. But first, a detour.

I Love the City

I was born in a city. I grew up in a city. I didn’t live in a single family house until high school, when we finally moved into a parsonage that wasn’t an apartment.

But the four years of high school I spent in suburbia do not bring to mind many fond memories. There is a reason why this song by the Pet Shop Boys was one of my favorites during that time:

Like many teenagers across the safe suburban neighborhoods, I wanted excitement and thrills and the arts and culture — not yet another night hanging out at the local strip mall being bored with my friends.

Living in Long Island, I took the LIRR into New York City as often as I could. I loved the city. I loved the sight and the sounds, and even the smell of New York City. I would walk around the streets of the Village, looking at all of the cool young hip artists and musicians, wander around Central Park and the ritzy streets that surrounded it, wonder who was in that black limo that just drove by, and stare at the names in lights on Broadway marquees.

And this was the pre-Giuliani New York, when there was a whiff of danger to Times Square.

After college (which was in a city, the grimy urban environs of New Haven) I moved to New York City as soon as I could. And not just to the City but to Manhattan, which I considered the real heart of the known universe. And when I found myself living not just in the heart of the universe, but in Soho, which I considered one of three acceptable neighborhoods for such a one as myself (Tribeca and West Village being the other two), I thought it a dream come true.

That classic map from the cover of the New Yorker? That was my 22-yo self’s picture of the world, but it was worse than that. North of 14th St would be a strange land, and north of 34th street was the country, as far as I was concerned, and only the museums, Central Park, and the Metropolitan Opera were relevant.

There was, I thought, nothing quite as intoxicating as walking down the treelined streets by NYU at 2 AM while intoxicated with booze, with energy, with the scent of a woman I had just met at some party or another… with life itself. Even at that hour, the yellow cabs would continue to tunnel through the night, and other groups of young people would be heading home, or perhaps heading to an after-party, or for a bite to eat.

Yes, the younger version of me was quite the wannabe… but who among us can truly say we weren’t at twentysomething? The wise, I suppose, but that wasn’t me at 22.

Even now, lo these many years later, I still get a tiny thrill visiting New York City, driving into the tunnel or over a bridge, and seeing the skyline. I still love walking around, marveling at the hustle and bustle of so many souls pursuing so many goals.

So when I say I love the city, and that I love urban living… I love the City.

But I would never live in a true vertical city like Manhattan again. Well, since we’re never supposed to say never… it would take some unique opportunity to make me live like that again.

Because you give up a lot to live in the city like that. Oh yes, you give up quite a lot to live that Sex and the City life.

The Downsides of Urban Living

We all know the familiar tropes, either from actually living in a major city, or from TV, movies and YouTube. It’s expensive as hell; the rent is absolutely no joke, especially when you’re young, just starting out, and barely making ends meet. Buy a place? Fuhgeddaboutit, until you’ve made it up the ladder quite some way. And for all that money, you’re living in a space not much larger than most suburban master closets, and your “kitchen” is similar to what can be found in a camper van.

Some of the other downsides are more difficult to know until you’ve lived the life.

For example, fresh vegetables used to be really quite difficult to find in a grocery store even in the heart of the greatest city on earth. Maybe the advent of Whole Foods and other health-conscious stores have changed that, but it just took time for all that produce to get trucked in, then distributed. Plus, who cooks in Manhattan? On that tiny burner plate they call a kitchen?

And most importantly for our purposes, it is really quite difficult to be alone in a city. You’re never too far away from another human being, whether walking down the sidewalk, or riding the subway/bus, or going to a restaurant, or even when going out to exercise. You are always standing in lines… for food, for coffee, for movie tickets… for just about anything.

For that matter, wherever you live in Manhattan, you’re likely not 6 feet away from another person… vertically. Someone lives above you, and someone lives below you.

You are always by other people. That is, after all, the whole point of a great city: to be around enormous numbers of other people.

Most of us who want that urban lifestyle, which means most Millennials and GenZ, want the same thing that the younger version of me wanted: walkable downtowns, plenty of bars and restaurants, a vibrant nightlife, culture and the arts around every street corner, unique stores that carry hard to find goods from across the world… all filled with other cool, hip, well-educated strivers.

Plus, the city is where all the good jobs are.

All of that is now changed, perhaps for good.

The Pandemic and the Cultural Shift

While nobody truly knows anything about this disease, we do know that it is the first time in history that the entire national economy has been shut down. Whether that was a good idea or a bad one doesn’t matter to us: what matters is the psychological shift, the cultural change, that happens because of the lockdowns.

I heard a podcast with some important tech executive or another; I can’t recall whom, because well, my nights are filled with important talking heads doing the talking head thing. But he said what I’ve been saying since the beginning: the pandemic accelerates all of the trends that have been evident to anybody paying attention.

Near the top of the list for society and culture as a whole is the underlying idea that other people are bad for one’s health. As Sartre wrote, “L’Enfer, c’est les autres.” Whether we discover a vaccine and a cure or not, these weeks not just in isolation but with every talking head and every social media channel telling us to keep our distance, stay apart, and to isolate will have a profound impact on all of our psyches. It’s the childhood rhyme of Stranger Danger writ large into our collective subconsciousness.

Very close to that change is the rapid realization by bosses and their minions that the mid-20th century ritual of going to the office might be just that: a mid-century ideal, like an Eames chair. And like an Eames chair, “going to the office” might be equally cool, hip and reserved for the rich.

We currently have millions of white-collar workers working from home, using tools that have long been available. We have known for years that someone whose labor is primarily on a computer and telephone doesn’t actually have to be physically sitting at the cubicle next to you in order to get her job done. But the business culture — especially on the part of the Boomer bosses — dictated that you got up, drank your coffee, put on professional attire, got into your car, and drove to the office.

Sure, there is no substitute for physically meeting face to face, especially for large team meetings and such. But the entire country is working from home using video, using Slack, using telephones and laptops, and making it work. The real productivity killer isn’t the fact that Joe from Accounting is not two floors up, or that Sally in Marketing is not down the hall. The real productivity killer (if it does indeed kill productivity) is that these stay-at-home workers are having to take care of their kids, homeschool them, feed them, and keep them occupied — assuming they have kids at home on lockdown as well. I haven’t seen any stats or studies yet, but I’d be willing to bet that those remote workers without kids at home (the majority of younger workers) are just as productive as they were while sitting in cubicle #425 next to the copy machine.

We’re only a few weeks into this pandemic, and already, people are getting used to having Zoom meetings (except #PoorJennifer), using Slack to chat with coworkers about some little thing or another, and getting shit done via the magic of the world wide web. They’re doing it while wearing shorts and flip flops on the bottom, and a suit and tie on top, because the video camera doesn’t care about what’s below the waist.

Now… as every business owner or manager knows, office space is not cheap. It’s typically the second or third largest line item in expenses for a service business. Is there is a reason why these sharp businessmen and women won’t look at the productivity of their workforce during these forced remote working sessions, then look at their P&L statements and conclude that they don’t need anywhere near the amount of office space they once thought they needed… with the attendant millions of dollars in rent?

If the pandemic told us anything, it is that remote working works for a lot of occupations. Doctors and nurses? Not so much. Lawyers and accountants, very much so. Plumbers can’t work remotely, but graphic designers absolutely can.

Take Me Home, Country Road

Combine the two above and I really do think that the exurbs become the hottest new sector of growth for residential real estate.

Wikipedia, following the Brookings Institute, defines exurbs as those census tracts with:

  1. Economic connection to a large metropolis.
  2. Low housing density: bottom third of census tracts with regard to housing density. In 2000, this was a minimum of 2.6 acres (11,000 m2) per resident.
  3. Population growth exceeding the average for its metropolitan area.

Exurbs are different from suburbs, which are still very densely populated. Right here in my home city of Las Vegas, the suburbs are Henderson and Summerlin, and the exurbs are Mesquite, Pahrump and Kingman, AZ. For someplace like Sunny’s hometown of Seattle, the suburbs might be Burien (where she grew up), Bellevue, Tacoma, and Edmonds, and the exurbs might be Burlington, Whidbey Island, and Cle Elum.

The primary appeal of exurbs is wide open space. Minimum of 2.6 acres per resident? And because exurbs often overlap rural areas, it really wouldn’t be difficult to find actual acreage with a farmhouse on it. Depending on the part of the country, the exurbs are breathtakingly beautiful; many of our state and national parks are located precisely in these exurban counties.

Best example I could come up with from personal experience: the small town of Robbinsville in western North Carolina, deep inside the Nantahala National Forest with the Great Smoky Mountain National Forest mere miles away, and the Appalachian Trail running through it. It is just gorgeous there, surrounded as you are by mountains, trees, forests, rivers, and wildlife.

But someone living in let’s say Greenville, SC and working as a marketing coordinator for the local bank could never live in Robbinsville. It’s about a three hour drive, each way. There’s no way.

Or… shall we say, there was no way in the era now known as B.C. or Before Covid. Today? Why not?

As long as the exurbs have good strong internet, why couldn’t our marketing coordinator live in Robbinsville and telecommute to her job in Greenville? For those occasions when she does actually have to come into the office — maybe for an important meeting — she can drive the six hour round trip. If that’s once a month, that’s doable. If it’s once a week, well, maybe Robbinsville is too far, but Brevard, NC which is only an hour or so away is not.

City dwellers, particularly those younger Millennials in their late 20s or early 30s who aren’t out partying every night and looking to meet Mr. Right or Miss Right Now, who loved the city as much as I once did have to deal with their subconscious whispering to them that Other People Are Bad for My Health. The crowded subways and trains no longer seem like a mere inconvenience; now they start to feel like a potential roll of the dice on the mortality rate tables. Eating out at great neighborhood restaurants was a real pleasure and a mainstay of urban living, but they’ve been cooking and slowly learning to enjoy it for weeks now… plus do you really want to be in a crowded restaurant ever again?

The suburbs will still be an option, but you’re still living more or less cheek to jowl with your neighbors in slammed in master planned developments. And the modern American suburb is a series of homes and strip malls, which are convenient as hell… but it’s suburbia with everything that word implies. (See above, Pet Shop Boys).

And the most appealing part of the exurbs for younger families? Property values are a fraction of what they are in the cities and in the close-in suburbs. At least today.

I can’t speak for anybody else, obviously, but as a city-born and city-raised boy, if I were going to give up the convenience, the dining options, the easy shopping, the excitement, and the business and cultural advantages of a city, I’m going to want something more than a quarter-acre lot in a master planned community surrounded by strip malls. I’m going to want the wide open spaces, a backyard measured in acres instead of square feet for my kids and dogs, the majesty of the mountains and forests and lakes, easy access to outdoor activities, and the clean air and water that can be found all over this great country of ours.

The suburbs have always been a compromise between city and country, driven by the need to be closer to work. If that need goes away… why must we make that compromise?

Local Experts Are More Essential in the Country

Something to consider is the idea that while great real estate agents who really know their markets, know their areas, and know the inventory are important anywhere, they are particularly essential if you’re thinking about buying in the exurbs or in rural areas.

For one thing, property just doesn’t turn over as much or as frequently out in the country as it does in metropolitan areas. Instead of a dozen comps from last week in a three block radius, you could be looking at a single comp from two years ago located a mile away. Having an advisor who really knows the local area, who knows that this particular house gets way more wind than that other house, or knows which roads are typically closed in a snowfall might be even more important.

And for another, it may be even more important to get a great local real estate agent if you hope to integrate into the community. Angie’s List and Nextdoor and Yelp might not be all that useful outside urban environments; you’re going to want a local guide to help you settle in to your new community with new neighbors.

I’m sure I’m missing all the other ways in which real estate outside of the metropolitan areas is different, so I invite anyone with experience in the exurbs and rural markets to chime in.

The Silver Lining

I think the rise of the exurbs might be a silver lining we’re not thinking about today.

We already know that some of our urban areas have gotten impossibly expensive for all but the rich to live in, never mind buying a home in. Those areas — I’m looking at you, San Jose — could use a big drop in home prices to enable families who are not yet actual millionaires to buy there. Plus, those who can still afford to live in urban areas and willing to continue for all that the city offers would appreciate the decrease in traffic, smaller crowds at hot spots on weekends, and the like.

Conversely, our exurban and rural areas could use a lift in property values that comes from increased demand. Most could use an increase in local economic activity from an increase in population. Who knows, maybe one of the city slickers who moved out to that small town might start a business and start providing jobs to local youths whose opportunities were more constrained.

Such a move from the city to the country is not for everyone. If you’re like the fictional Rose family in Netflix’s Schitt’s Creek (an amazingly funny show, by the way), you should stay in the city for sure.

I see the rise of telecommuting as a net positive for our businesses and our society, even our environment. We have all seen the pictures of blue skies in Los Angeles from weeks of nobody driving to and from work. It doesn’t strike me as a negative to cut commuting by half or more.

We have all speculated that businesses will start to look at the enormous expense that is office space in the aftermath of this pandemic. Could some of that rent expense go towards hiring more people to provide more value, to pay workers more, or just to generate more profit? (As a diehard capitalist, I know that profit goes towards increased investment or into banks to be lent out to other people. Business owners don’t just eat it, or burn it. Even if they buy a yacht with that profit, the yacht makers and their workers make money from that. So I see it as a positive. YMMV.)

And for society as a whole… those families that survive this crisis will have learned that nothing brings a family closer together than actually spending time together. No amount of family game nights and “quality time” stuff can substitute for just having mom and dad around every day and every night.

Those families that do not survive being with each other every day probably weren’t going to survive anyhow. I’m sorry, but it is the truth that no good marriage ever ends in a divorce.

Finally, perhaps this diaspora from our cities out to the country might be what is needed to heal the increasingly partisan and increasingly bitter divide in our country. Perhaps the Democrat lawyer from the big city and the Republican farmer from the countryside might come to realize that they’re really not that different from each other, and that they share more in common and agree more than they disagree. Maybe the latter would understand that eating kale and drinking kombucha do not make one a communist, and the former would realize that in fact guns do not go on mass killing sprees by themselves. The more ignorant prejudices we eliminate on both sides, the better. The more we can have disagreement without contempt, the better.

Because when we come out of this crisis, and we will, we all are going to need a lot more unity to move forward. If that takes a change not just in how we live but also in where we live, well, silver lining playbook, y’all.

-rsh

 

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Rob Hahn

Rob Hahn

Managing Partner of 7DS Associates, and the grand poobah of this here blog. Once called "a revolutionary in a really nice suit", people often wonder what I do for a living because I have the temerity to not talk about my clients and my work for clients. Suffice to say that I do strategy work for some of the largest organizations and companies in real estate, as well as some of the smallest startups and agent teams, but usually only on projects that interest me with big implications for reforming this wonderful, crazy, lovable yet frustrating real estate industry of ours.

2 thoughts on “Silver Lining from Pandemic, #3: The Rise of the Exurbs”

  1. Hey Rob, good piece! Being a Realtor that works both suburban, exurban and rural areas in IL and WI, I agree with your thoughts for the most part…although comps for rural areas (at least in my market) are not as hard to find as you’ve mentioned here. I live and work midway between Chicago and Milwaukee and we have every sort of market that you can imagine…well except for ocean front or mountain property (unfortunately). I’m finding, as are many of the local agents here, that a number people are heading over the IL border into WI for just those reasons you mentioned…and more…mostly for more affordable larger lots…such as actual acreage like you mentioned and cost of living (and some say to leave a dying state, ha ha). It seems to have been the beginning of a “movement” if you will, which has been brought to light more in the past month. I definitely agree with you that it is beneficial to have a local agent show their buyers around the area they are considering. We are the experts and it’s fun to point out area historical sites, the best fishing spots, best rural roads to cruise on your Harley, how far the property is from the major city, the best places to get good deals on…whatever. It’s actually the most fun part of my job!

    As for working remotely, I know a few people who have been working from home, either 100% of the time or a few days here and there when their employer allowed it. I have family members that have been doing it for a while now. With the pandemic though, more are for sure and it made me wonder, like you, why not have them do it more often? It would save money all around and people can live in much more affordable areas. I do wonder about the commercial property now. Unless we get more manufacturing back in the U.S. I can see that those values will be decreasing…a lot.

    For me, I have been working for the virtual real estate brokerage EXP Realty, for over 2 years now, and this type of work (telecommuting) just makes sense. I’m so thankful for technology because it allows a lot of people to continue to work during a pandemic. Imagine if this happened just 20 years ago. Being able to continue to jump into meetings via Zoom, or conference calls, or meeting in EXP World for weekly state meetings, company training and the like, is something that was not possible pre 21st century (for the most part). For me, working remotely isn’t much different than how I’ve been doing business for the past 2+ years and I’m surprised that more companies haven’t jumped on board…I’m sure they will be now, or at least looking into it, when they realize not only that it can work but that it can save them serious money…it really IS the future.

    The biggest realization for me personally in all of this, is that with this technology comes the ability to still see, connect and interact with my family and friends. Imagine being in all of this and not getting to experience fun things like seeing what’s happening around us via social media, having a family Zoom call, or seeing our kids and grand kids on snapchat and tik tok acting goofy…I wouldn’t be able to handle it.

  2. I live in rural NE Penna. – where the local Chamber of Commerce plugs that we are within a 3 hour drive of 1/3 of the US population (NYC, Phila/Baltimore/DC etc). Historically the coal region now home to big box distribution centers that line I-81 and 78. Anecdotally per your piece, post-911 we saw an influx of NYC and NJ types moving to “the country” for exactly the reasons you outline. They saw the country as safer, slower, and a better place to raise their families. Some moved in and stayed, while others moved back after the panic subsided.

    I sold one Wall Streeter a 10-acre farmette for under $300k and he thought he hit the lottery. A few years later he sold it after he figured out he wasn’t cut out for farm life. He stayed around but moved to a house in town.

    We are seeing the beginnings of this stuff again. Leads are coming into our platform again from NY and northern NJ hitting on our “high end” properties. Our average sale here is under $100k and anything over $250k is a big listing. You can get a top of the line large house on a half acre or more for under $400k here.

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